Accounting Standard followed by the company
i) General Mills Inc:
Referring to Note 1 of the financial statement, we notice that General Mills Inc follows Generally Accepted Accounting Principle(GAAP).
ii) Meiji Holdings:
Referring to the Note 1 of the consolidated financial statements, we find that Meiji Holdings are following Generally Accepted Accounting Principle(GAAP) in Japan. In addition, the company specifically declares that the consolidated financial statements of the company are not prepared in accordance with GAAP standards prevalent in countries or jurisdictions other than Japan.
Accounting Standard followed by the auditors
i)General Mills Inc:
Referring to the report of external auditors, we find that the consolidated financial statements of the company have been audited by KPMG LLP using standards of Public Company Accounting Oversight Board(United States). The respective standards obligate the external auditors to ensure that the consolidated financial statements of the company are free from any material misstatement and to check if the standards of internal controls were also followed by the company.
Referring to the report of the external auditors, we have found that the consolidated financial statements of the company are audited by Ernst and Young Inc. following the auditing standards prevailing and accepted in Japan.
Comparing consolidated financial statements of both the companies
Referring to the income statement of both the companies, the only difference between presentation of the income statement is the number of years for comparative information. As for General Mills Inc, the company has included three year of comparative income statement while Meiji Holdings on the other hand has included only two years of comparative income statement and have provided translation of the figures in US dollars only for the latest year , i.e. 2013.
The balance sheet of both the companies differs in terms of currency of accounting figures recorded and also the detail of information presented. As for General Mills Inc, the company has presented its balance sheet comparing figures for the year 2012 and 2013 in US dollars. On the other hand, Meiji Holdings although has included information relating 2012 and 2013, but only the accounting data relating to 2013 was presented in US Dollars.
In addition, we noticed the balance sheet of Meiji Holdings is more informative on face. In other words, while General Mills has only included detailed information relating to current assets only, Meiji Holdings has explained its current assets, fixed assets and investment in detail in its balance sheet. In addition, Meiji Holdings has stated the contingent liabilities along with the balance sheet unlike General Mills that declared its contingent liabilities in the footnotes to the financial statements.
iii) Statement of Cash Flow:
Although both the companies has used indirect method for presentation of the Cash Flow Statement, however, just as previous financial statements, General Mills has presented the information for the year 2011, 2012 and 2013 in US Dollars while Meiji Holdings has presented the cash flow figures for the year 2012 and 2013 with only accounting figures of 2013 presented in US dollars.
Defining various filings by a public company
i) Annual Report:
An annual report is the mandatory annual publications to be issued by a public company so as to provide financial as well as non-financial disclosures relating to the preceding financial year. The annual report of a company majorly includes following sections:
-Financial Highlights-Letter to the Shareholders-Narrative Text, Graphics and Photos-Management's Discussion and Analysis-Financial Statements-Notes to Financial Statements-Auditor's Report-Summary Financial Data
ii) Form 10K:
Just as the annual report, Form 10-K is the mandatory annual filing of the company. The filing typically includes more information than the annual report and includes information relating to management disclosures, legal matters, financial statement and lot more. Important to note that every company must file its 10K report within 60 days after the end of the fiscal year.
iii) Corporate Social Responsibility Reporting:
Also known as Corporate Citizenship Report, CSR report includes all the information as how the business operations of the company are in accordance with ethical needs of the society and the environment. Companies these days details extensive information as how their operations have contributed towards betterment of the society.
Comparing the above three reports
Although the information contained in SEC 10 K and the annual report of the company is similar in nature but 10K contains typically more information than the annual report. However, in no way an annual report is a substitute to the 10K filing.
On the other hand, unlike annual report and SEC 10 K, corporate social responsibility report includes information relating to the societal aspect of the company and how its management has worked for the better of the society and the environment.
Qi)Which company is more profitable?
Noted from the income statement of both the companies, we find General Mills to have higher net profit margins in comparison to Meiji Holdings. As for the year 2013, the former company has net profits of $1855 Million and net margin of 10.4%, while the latter company has $177 million in profits with net margins of 1.48% only.
ii) How can you explain the difference in profitability between the two companies?
The significant difference in profit margins of both the companies is related to difference in revenue figures. As for Meiji Holdings, during 2013, the company recorded revenue figures of $11997 million while General Mills has recorded revenue worth $17774 million.
In addition, higher proportion of cost of sales and operating expense also contributed towards lower bottom line profits of Meiji Holdings. For Instance, Meiji Holdings had higher proportion of cost of revenue of 66% and operating expense ratio of 31.6% in comparison to 63.8% of cost of sales and operating expense ratio of 20% of General Mills Inc.
iii) Compare growth of revenues versus income over time and between the two companies.
As for General Mills, since 2012, the revenue figures of the company have been increased by 6.70% while the bottom line profit has been increased by 18.3%.
In comparison, for the same time period, Meiji Holdings recorded growth in revenue by 1.55, while the net profits of the company increased by 144.61%. The primary reason for exorbitant increase in the net margins of the company was higher revenue figures, increase in other income and extraordinary gains recorded.
Financial Figures used to answer above questions
All the figures below are in USD Millions:
Definiiton of 10K. (n.d.). Retrieved October 26, 2014, from Investopedia: http://www.investopedia.com/terms/1/10-k.asp
Definition of Annual Report. (n.d.). Retrieved October 26, 2014, from Investopedia: http://www.investopedia.com/terms/a/annualreport.asp
General Mills Inc. (2013). Annual Report 2013. General Mills Inc.
Meiji Holdings Co., Ltd. (2013). Annual Report 2013. Japan: Meiji Holdings Co., Ltd.